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Payroll deductions

At payroll time, there are some payments you must deduct from your employees' wages or salary, like PAYE. There may also be voluntary payments your employees ask you to make on their behalf.

Payroll is something lots of small business owners find it's better to contract out or employ someone to do, especially once there are a few employees on board. If you don't want the ongoing expense, consider getting some help to set up your systems or if things get tricky, eg you need to make an employee redundant.

PAYE and ACC levies

PAYE, or pay as you earn, is tax you deduct from any wages or salary you pay to an employee. It includes a payment towards their ACC earner’s levy. Inland Revenue provides PAYE deduction tables and calculators to help you work out how much to take out of your employees' pay. Accounting or payroll software can help make PAYE easier.

Schedular payments

New tax laws have extended schedular payment rules to all contractors. For many contractors, this means they can now choose to have tax deducted from their pay if the payer agrees. Those hired and paid through a recruitment agency, or other labour hire business, must have tax deducted.

All contractors can pick the rate to have tax deducted at. New Zealand tax residents can pick any rate from 10 per cent up to 100 per cent.

KiwiSaver and other superannuation contributions

KiwiSaver is a voluntary scheme to help New Zealanders with their long-term saving for retirement.

When you hire an employee, find out if they’re eligible to join. If they are, but aren’t already registered, you need to enrol them. They can opt out, but you still need to enrol them first. Your employees have some choice as to how much they want to put towards their KiwiSaver fund, and you'll deduct their contributions from their pay. You also need to make employer contributions.

You'll be taxed on any cash contributions you make to an employee’s KiwiSaver or other superannuation scheme. This could be ESCT (employer superannuation contribution tax) or PAYE.

Student loans

If an employee has a student loan, you may need to deduct repayments from their pay. Whether you make deductions, and how much you deduct, is based on their income.

Inland Revenue’s PAYE deduction tables and calculators will show you how much to take out of their wages or salary based on their income.

You must make deductions as required, but your employees can ask you to make extra payments — if so, they’ll tell you how much more to take out of their pay. Inland Revenue can also ask you to deduct extra compulsory payments to put towards student loans.